By Ed Mendel | 03/21/13 1:00 AM PST

The nonpartisan Legislative Analyst’s Office yesterday recommended that the Legislature adopt a plan to fully fund CalSTRS in 30 years — an estimated cost of $4.5 billion a year, a hefty addition to current annual contributions totaling $5.7 billion.

That’s not likely to happen as the state, with a budget back in the black from an improving economy and a voter-approved tax increase last fall, faces demands to restore what some say were $20 billion in classroom cuts during five years of deep deficits.

But after years of ignoring a growing CalSTRS debt or “unfunded liability,” the Assembly and Senate public employee retirement committees held a joint hearing yesterday on proposed solutions requested by a Senate resolution last year.

Ryan Miller of the Legislative Analyst’s Office told the committee that the unfunded liability of the California StateTeachers Retirement System, a century old this year, “may be the state’s most difficult fiscal challenge.”

The analyst said the CalSTRS unfunded liability is twice the size of what Gov. Brown calls “the wall of debt” from years of budgetary borrowing. The governor’s proposed budget spends $56 billion on K-12 funding under the Proposition 98 guarantee.

A lobbyist for teacher unions, Jennifer Baker, told the committee a “huge” issue is whether an increase in contributions to CalSTRS would count as part of the Proposition 98 guarantee or be additional funding for schools.

The Legislative Counsel told the committee that requiring school districts and other employers to contribute more to CalSTRS would trigger an offsetting increase in the Proposition 98 guarantee.

An opinion from the state attorney general disagrees. A lobbyist for school administrators, Sal Villasenor, said the Proposition 98 issue should be resolved “sooner rather than later.”

The lobbyists for teachers and administrators both urged the legislators to boost the state contribution to the CalSTRS pension fund, now about 2.5 percent of pay, back to the 4.6 percent rate cut in the late 1990s.

“We would stress the need for the state’s rate adjustment to take place prior to seeing any other rate increases,” said Villasenor.

“Prior to increases in educator members and school district and community college (contributions) the state needs to return to its previous level of funding,” said Baker.

The state currently contributes 2.5 percent of pay to the CalSTRS pension fund and another 2.5 percent of pay to a separate inflation-protection fund for long-time members, a total of $1.4 billion.

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